Craft beers surging in popularity

Double-digit growth across the industry making it difficult to meet increasing demand

April 02, 2011|By Robert Channick, Special to the Tribune

Assistant brewer Justin Whitney maneuvers a pallet keg in the aisle of oak tanks and fermenters in Warrenville. The Two Brothers Brewing Company is one of the most successful craft brewers. (Chuck Berman)

When it was announced last week that Goose Island is being sold to Anheuser-Busch for $38.8 million, it set the blogosphere atwitter with concerns that a local beer apocalypse was brewing.

For the burgeoning ranks of breweries and aficionados, the Chicago craft beer scene is a lot closer to the beginning than the end.

With double-digit growth across the craft beer industry, several new entrants are opening for business, while established local favorites such as Half Acre, Three Floyds and Two Brothers are all furiously ramping up production in a seemingly futile effort to meet increasing demand.

"We just can't make enough beer," said Gabriel Magliaro, 32, a former magazine advertising director who opened Half Acre Beer Co. in a converted North Lincoln Avenue warehouse in Chicago in 2008. "Our goal every week is just to try not to run out of beer."

A homegrown revolution that took root in the 1980s, the craft beer industry grew from a handful of pioneers to more than 1,750 breweries in 2010. Early leaders included Sierra Nevada, Samuel Adams and Anchor Brewing, which was sold last year to the Griffin Group, a private-equity firm.

"Craft beer is kind of a rising tide right now," said Benj Steinman, president of Beer Marketer's Insights. "It's really in the sweet spot of where more consumers are going, and that seems to be toward the sort of innovation, flavor and variety that the craft brewers are epitomizing."

Craft beer sales came in at just under 10 million barrels in 2010, an 11 percent annual increase, while total U.S. beer sales were down 1 percent, to 203.5 million barrels, according to the Brewers Association. Some 30 percent of craft beer is sold on tap, three times the industry average.

With a higher price point — most sell for about $9 per six-pack — craft beer revenue is relatively stronger, accounting for $7.6 billion out of $101 billion in total beer sales last year.

Revenue is growing faster in Chicago, the nation's seventh-largest craft beer market, with store sales up 22 percent last year, to about $22.5 million, according to the SymphonyIRI Group. The top two markets are in the Pacific Northwest — Portland, Ore., and Seattle — which account for 12 percent of craft beer sales nationally.

The top-selling craft brewer in Chicago was the Craft Brewers Alliance, which includes Goose Island, followed by Samuel Adams and New Belgium. Two Brothers ranked ninth, and Three Floyds ranked 14th in local sales, according to SymphonyIRI.

Excised from the official ranks of independent craft brewers — major brewers can't own more than 25 percent, according to industry standards — Goose Island was technically delisted in 2006 when it sold a 42 percent stake to the Craft Brewers Alliance, which is partly owned by Anheuser-Busch.

Still, it remained by far the largest of the local manufacturers, selling about 127,000 barrels of Honker's Ale, 312 Urban Wheat Ale and other brands in 2010.

Goose Island's output pales compared with Boston Beer Co., maker of Samuel Adams, the nation's largest independent craft brewer, which shipped about 2.3 million barrels in 2010. But local craft brewers consider even six-figure barrelage to be both unreachable and undesirable.

Consider aptly-named Two Brothers Brewing Co., which wants to get bigger, but not too big.

Started in 1996 by brothers Jason and Jim Ebel, they made early batches out of a dairy tank, with neither sibling drawing a salary for eight years. The company turned its first profit in 2005 and promptly moved from a 5,000-square-foot facility into a 30,000-square-foot complex with an attached restaurant.

Like many craft breweries, the long road to reach critical mass was daunting, and expensive, for the inherently capital-intensive business.

"We probably should have quit four or five times, but we were stupid enough or determined enough to stick with it," Jason Ebel said.

Most of the Two Brothers' earnings are funneled back into the business, said Ebel. That's a widespread trend, according to Paul Gatza, Brewers Association director.

"A lot of the craft brewers have a hard time getting money out of it because they have to pump it back in to compete," Gatza said.

Hoping to expand production from 17,000 to 25,000 barrels this year, Two Brothers is investing $1.5 million into its Warrenville facility.

"It seems like an ongoing expansion for us — new tanks, new equipment all the time — and we still can't make beer fast enough," said Jason Ebel, 40.

Shipping to Illinois, Indiana, Ohio and Minnesota, as well as New York City for publicity, Ebel sees 50,000 barrels as the ceiling for annual production, by choice.